Help to buy ISA vs Lifetime ISA for my situation

Tigris1

Hi,

I've been saving into an "help to buy ISA" account which I now am exempt from the bonus due to inheriting a small property which I let out (the first property I purchase means I am not classed as a first time buyer).

Would I be better off putting the money into a

"lifetime ISA" rather than the "help to buy ISA"?
(Final goal is to use the money for our own home).

There maybe other ISA's i'm not aware of? 

Thanks 

Emmia

There are also Stocks & Shares ISAs (better for longer term investment) and Cash ISAs. How the transfer might work between them though I'm not sure - but money saved there wouldn't be restricted to property purchases and related activities.

badger09

Tigris1 said:

Hi,

I've been saving into an "help to buy ISA" account which I now am exempt from the bonus due to inheriting a small property which I let out (the first property I purchase means I am not classed as a first time buyer).

Would I be better off putting the money into a

"lifetime ISA" rather than the "help to buy ISA"?
(Final goal is to use the money for our own home).

There maybe other ISA's i'm not aware of? 

Thanks 

If you already own a property, you won’t be able to use a LISA & bonus to purchase your home. At least not without paying a penalty which would defeat the objective. 

PRAISETHESUN

Owning a property also disqualifies you from using a LISA for a property purchase also. Without having a qualifying reason to withdraw money put into a LISA you get hit with the penalty, which results in you getting less than you put in, so I'd personally avoid it if you won't be saving for retirement (and AFAIK pensions are usually better for this anyway).

A better question to ask is if you actually need an ISA at all? It's not always the case, but cash ISAs can be beaten by non-ISA savings, even when factoring in potential tax on the interest for exceeding the personal savings allowance. For investments, stocks and shares ISAs are a decent choice, but that's more of a longer-term thing which probably isn't suitable if you need the cash within the next 5 years.

PRAISETHESUN

Emmia said:

There are also Stocks & Shares ISAs (better for longer term investment) and Cash ISAs. How the transfer might work between them though I'm not sure - but money saved there wouldn't be restricted to property purchases and related activities.

H2B ISAs are treated as cash ISAs, so can be easily transferred to other providers if needed.

Tigris1

Thank you for the replies

There's probably no point me using my help to buy ISA anymore then? It was good for me as the maximum allowed per month (to be put in) is £200 so I would aim to max that each month. Would I still be able to use any interest earned in that account to go towards our home purchase? 

Sounds like I maybe better off just using a standard savings account which I do actually have as well. I do have money in a stocks and shares ISA but I put some in years ago and I tend to just leave that as it is.

The main reason for the savings would be to purchase a house. 

eskbanker

Tigris1 said:

There's probably no point me using my help to buy ISA anymore then? It was good for me as the maximum allowed per month (to be put in) is £200 so I would aim to max that each month. Would I still be able to use any interest earned in that account to go towards our home purchase?

Technically you shouldn't have continued to pay into a HTB ISA once owning a property but you can now transfer out the full balance, including interest, and use it however you see fit.

In terms of where to put the money, it would be fairly typical to look to maximise net return, whether that's via taxable savings accounts or ISAs, but as above, the evaluation of which is the best answer will depend on how much taxable savings interest income would fall within your various tax allowances:

https://www.moneysavingexpert.com/savings/tax-free-savings/

Tigris1

eskbanker said:

Tigris1 said:

There's probably no point me using my help to buy ISA anymore then? It was good for me as the maximum allowed per month (to be put in) is £200 so I would aim to max that each month. Would I still be able to use any interest earned in that account to go towards our home purchase?

Technically you shouldn't have continued to pay into a HTB ISA once owning a property but you can now transfer out the full balance, including interest, and use it however you see fit.

In terms of where to put the money, it would be fairly typical to look to maximise net return, whether that's via taxable savings accounts or ISAs, but as above, the evaluation of which is the best answer will depend on how much taxable savings interest income would fall within your various tax allowances:

 Thank you, will contact Barclays to close my H2B. 

My standard savings account with Barclays doesn't look like it earns any interest at all. Looking at that link I should make the most of the £1,000 tax free interest really. 

PRAISETHESUN

@Tigris1

The H2B ISA doesn't have the same withdrawal restrictions as a LISA, so you can safely withdraw any money + interest. Just decide for yourself first if you still want to use an ISA or not. If you straight up withdraw from your cash ISA you might not be able to put it back into another ISA if you've reached your annual ISA limits. Instead you need to use the special ISA transfer process to move it between ISA providers. If you decide you don't need an ISA then you are fine to withdraw it as normal.

I'd definitely start exploring savings accounts as you can easily get 4-5% interest on easy access for minimal effort: https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

Tigris1

PRAISETHESUN said:

@Tigris1

The H2B ISA doesn't have the same withdrawal restrictions as a LISA, so you can safely withdraw any money + interest. Just decide for yourself first if you still want to use an ISA or not. If you straight up withdraw from your cash ISA you might not be able to put it back into another ISA if you've reached your annual ISA limits. Instead you need to use the special ISA transfer process to move it between ISA providers. If you decide you don't need an ISA then you are fine to withdraw it as normal.

Thank you.

Vanquis bank seem a good option. I used to be a Barclays blue reward member but most of my direct debits go out from my business bank which isn't with Barclays meaning I'm not a blue reward member now. If I was they are offering 5% interest. Vanquis are offering 4.85% currently and you can withdraw the money when required. 

PRAISETHESUN

Tigris1 said:

PRAISETHESUN said:

@Tigris1

The H2B ISA doesn't have the same withdrawal restrictions as a LISA, so you can safely withdraw any money + interest. Just decide for yourself first if you still want to use an ISA or not. If you straight up withdraw from your cash ISA you might not be able to put it back into another ISA if you've reached your annual ISA limits. Instead you need to use the special ISA transfer process to move it between ISA providers. If you decide you don't need an ISA then you are fine to withdraw it as normal.

Thank you.

Vanquis bank seem a good option. I used to be a Barclays blue reward member but most of my direct debits go out from my business bank which isn't with Barclays meaning I'm not a blue reward member now. If I was they are offering 5% interest. Vanquis are offering 4.85% currently and you can withdraw the money when required. 

The Barclays rainy day saver isn't as good anymore. They gotten rid of the £5/month reward for DDs meaning you always have to pay the £5 monthly fee, which lowers the effective net return